Public charities & zakat for jihad

December 10, 2009

A new report from Stanford University reveals that whopping 99 percent of self-described public charities in the U.S. have their applications for tax-exempt status approved by the IRS.  The researchers found that “Oversight of the creation of nonprofit organizations, and the conferral of tax exempt privileges that accompany nonprofit status, is weak, bordering on non-existent” (p. 3).

But this cannot be read as a garden variety tale of government incompetence or neglect.  These findings pose grave risks for the laundering of zakat donations by Islamic “charities” without any front end scrutiny by the IRS.  Here’s an excerpt from the frightening study:

While the IRS has made efforts in recent years to improve oversight of the nonprofit sector by redesigning the tax forms which nonprofit organizations are required to file (if they earn more than $25,000 in revenue in any given year), little attention has been paid to the record of oversight in the determination of nonprofit status. The oversight at the entry point to nonprofit status, as we will show, is weak. Nearly every application on which a decision is rendered is approved.

We focus our attention on the fact that the IRS approves more than 50,000 applications for 501(c)(3) status every year and rejects only a very, very small number of applicants. Obtaining recognition by the IRS as a public charity is an embarrassingly easy thing to do. It is hardly an exaggeration to say that when it comes to oversight of the application process to become a public charity, nearly anything goes.

The problem is that for Islamic jihad and organizations such as Al Qaeda, the main revenue source is zakat funneled through “charities.”  Zakat is routed through mosques, Islamic charities, and even foreign states or political parties, sometimes for genuine charity for poverty alleviation, but all too frequently to support jihad.

It is bad enough that little scrutiny is given to these organizations by the U.S. (or by fellow non-Muslim nations of Europe and India), but it is extremely disturbing to learn that so few of the claims of charity status are verified in the first place.  Not only were, by extension, the vast majority of Islamic charities that claim tax-exempt status granted it, but their jihadist fellow travelers and donors get to write off their donations on their tax returns.

Meanwhile, Pres. Obama wants to loosen the minimal controls in place for zakat transfers.  Thus jihadist fund-raisers are given decreasing scrutiny, the IRS is auditing America’s poor.

Maybe I will go to a tea party after all!



  1. If the IRS had really been approving 99% of charity applications for the last 10 years, don’t you think we would have heard about it before now?

    To get this startling statistic, the Stanford researchers who wrote “Anything Goes: Approval of Nonprofit Status by the IRS,” excluded over 23,000 applications from their computations (see their footnote 7).

    These cases were excluded from Stanford’s “not approved” group in spite of IRS letters saying, “You are required to file Federal income tax returns,” and, “Contributions to your organization are not deductible.”

    The real IRS approval rate for charities last year was 69%. Check it yourself at http://www.irs.gov/pub/irs-soi/08db24eo.xls. IRS 2008 Databook, Table 24.

    Sandy Deja

    • I see your point, but the 24,000 “excluded” applications were not denied tax-exempt status–either their paperwork was incomplete or the organization withdrew it. From what I understand, they were still eligible for reconsideration.

      But I hope you’re right that the “real rate” is lower, but 1,242 out of 84,369 applications were rejected means a rate of just 1.47 percent…

      • Actually, even organizations that have been denied are eligible for reconsideration.

        If an organization can convince the IRS that it has changed how it is organized and/or how it operates enough that it now qualifies for tax exempt status, it can receive 501(c)(3) recognition in spite of the prior denial.

        A new application, and a new User Fee would be required, and the ruling would probably not be retroactive, but the door is actually never closed.

        I wrote to the authors of “Anything Goes” earlier this year, outlining some of my objections to their findings. You can view the whole letter at Click here: http://501c3book.org/uploads/1-4-10_Letter.doc

      • I wrote that “From what I understand, they were still eligible for reconsideration.”

        Then you wrote, “Actually, even organizations that have been denied are eligible for reconsideration.”

        Do I hear an echo?

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